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Electronic Commerce

Summary and Keywords

Electronic commerce (or e-commerce) is the purchase or sale of goods or services over any kind of computer network. Possible networks include the Internet; an extranet, which is a private platform that uses Internet technology, or TCP/IP; and an electronic data interchange (EDI) network. The study of e—commerce can be roughly divided into three levels of analysis: global systemic, state, and individual firm or person. The global systemic or international level considers how e—commerce influences relations between states. The state level considers how e—commerce affects the business of government and the relationship between the state and society (including firms and persons). It allows one to compare similarities and differences in terms of what governments are doing to promote (or, less commonly, to discourage) the use of e—commerce, and the impact of e—commerce on a country’s economic performance. Finally, the individual level, which looks at firms as well as individual persons, considers how e—commerce changes how firms and individuals interact within a given society, whether through their economic relations or otherwise. The literature on e—commerce differs by discipline, with considerably more attention given to e—commerce by the legal, business, and technical communities than by our respective social science disciplines, economics, and political science.

In the early days of the Internet revolution, in the early to mid-1990s, pundits predicted that the advent and dramatic growth of electronic commerce (or “e-commerce”) would have a vast impact on economies, governments, and societies. The literature on e-commerce has developed quickly since then, but much of it focuses on a relatively narrow set of technical, business, and legal issues—such as how to “do” it. More research needs to be done on questions of interest to international relations scholars, such as the impact of e-commerce on state sovereignty and the balance of power, the degree to which extant international institutions are able to govern this new mode of transacting, and whether and how different government regulations and cultural environments generate disparate outcomes.

What Is E-Commerce?

E-commerce is defined in multiple ways in the literature, although the differences tend to be matters of scope rather than of kind. Nonetheless, it is important to note these differences to ensure an apples-to-apples comparison.

The broadest definition of e-commerce is the purchase or sale of goods or services over any kind of computer network. Possible networks include (1) the Internet; (2) an extranet, which is a private platform that uses Internet technology, or TCP/IP; and (3) an electronic data interchange (EDI) network, which is a private platform that uses largely pre-Internet technology. This broad definition is used to measure e-commerce by many government agencies and international organizations, including the U.S. Department of Commerce and the Organization for Economic Co-operation and Development (OECD) (U.S. Department of Commerce, 2015; OECD, 2011).

A narrower definition is the purchase or sale of goods or services over the Internet using a computer, smartphone, or other device. In our book, Global Electronic Commerce: A Policy Primer, we used this narrower definition for two reasons (Mann et al., 2000). First, we believed Internet technology would quickly replace EDI networks because the costs for businesses to set up Internet transactions are substantially lower, the costs for consumers to make purchases over the Internet are lower, and Internet technology allows for more media-rich marketing than EDI networks (also see OECD, 1999). Our prediction that EDI would fade away did not prove accurate for a number of reasons, ranging from legacy replacement costs to lingering security concerns associated with Internet transactions. Nonetheless, Internet transactions have grown faster than EDI, so there is a trajectory toward a greater share of Internet-based e-commerce transactions.

Second, we believed that transactions conducted over the Internet would have a separate, beneficial economic impact apart from EDI transactions, first because the more open (versus closed or proprietary) Internet platform can convey more information about new products and services to more buyers, and this would spur more transactions. Further, increased efficiencies in production, marketing, sales, and distribution associated with conducting business over the Internet would underpin economic gain (Mann et al.,2000, pp. 23–26).

Despite the differences in the scope of transactions, these definitions of e-commerce actually represent points on a continuum. At a minimum, in order for a transaction to be classified as e-commerce, the ordering of the good or service must take place electronically. From there, the payment and delivery of the good or service can take place either electronically or physically (“offline”) (U.S. Department of Commerce, 2015; OECD, 2011). For example, a transaction with online ordering but offline payment and delivery would involve a customer who wins an auction bid on the eBay website, mails a personal check to the seller, and receives the item in the mail. An example of a transaction with online ordering and payment but physical delivery would be a customer who orders a book from Amazon, pays for the book online using a credit card, and receives the book in the mail. An example of a transaction with online ordering, online payment, and online delivery would be a customer who purchases a software update from Novell, pays for that software with a credit card or other means of electronic payment, and downloads the software onto the customer’s computer from the Novell website. All three of these transactions are e-commerce transactions but with increased intensity in the use of the Internet.

E-commerce transactions also involve a variety of purchasers and sellers, which can be individuals, businesses, or government entities. Transactions between a business and an individual are “business-to-consumer” (or B2C) e-commerce. Transactions between two businesses are “business-to-business” (or B2B) e-commerce. Governments can be both e-commerce sellers, such as with the online provision of permits and licenses (which, for the purposes of similar shorthand, we will refer as G2C or G2B e-commerce), and e-commerce purchasers, such as with government procurement contracts (B2G e-commerce).

Given the wide variety of participants in e-commerce transactions, as well as the global nature of the Internet, research questions on e-commerce of interest to international relations scholars include those focused on theory as well as empirics and policy, which we will discuss in more detail in the following section.

Major Intellectual and Social Dimensions

As with any research program in international relations, the study of e-commerce can be roughly divided into three levels of analysis: global systemic, state, and individual firm or person (building on Singer, 1961). The global systemic or international level considers how e-commerce influences relations between states. The state level considers how e-commerce affects the business of government and the relationship between the state and society (including firms and persons). It allows one to compare similarities and differences in terms of what governments are doing to promote (or, less common, to discourage) the use of e-commerce, and the impact of e-commerce on a country’s economic performance. Finally, the individual level, which looks at firms as well as individual persons, considers how e-commerce changes how firms and individuals interact within a given society, whether through their economic relations or otherwise.

Global Systemic

E-commerce raises a number of important questions at the global systemic level of analysis. First, does e-commerce alter the traditional divides between states, such as between developed and developing countries? To the extent that e-commerce creates business opportunities as well as efficiencies in production, marketing, sales, and distribution, then e-commerce can help to increase a state’s material well-being, both absolutely and relative to other states. If, on the one hand, the most powerful states in the system, which are also some of the most developed states, are in a better position to gain from e-commerce, then e-commerce simply mirrors or even exacerbates divides between states. If, on the other hand, less powerful states can use e-commerce to increase their material well-being vis-à-vis other, more powerful states, then e-commerce can help to alter the traditional balance of power.

Second, and also at the global systemic level, are extant international institutions able to govern the inevitable cross-border issues that accompany e-commerce? E-commerce represents an important test for the complex web of international institutions that have evolved during the post–World War II era, particularly those institutions tasked with managing international trade. To what extent are states working within these institutions, such as the World Trade Organization (WTO) and the World Intellectual Property Organization (WIPO), able to manage e-commerce issues, either proactively through rule making or post hoc through the institutions’ dispute settlement processes? Some state issues have required immediate resolution, as a result of which states have forged bilateral deals. Do these deals then become multilateralized? Further, the Internet has spawned new semiglobal institutions, such as the Internet Corporation for Assigned Names and Numbers (ICANN), to address some specific domestic and cross-border issues related to e-commerce. How do the old, the new, the global, and the bilateral institutions work together? Finally, in this latter context, lies the question of whether some powerful states engage in “forum shopping” on e-commerce issues; that is, do powerful states choose to rely on those institutions and sets of rules that best serve their interests, or do they create one-off deals as the need arises?

A third and final set of questions at the global systemic level of analysis concerns the role of e-commerce in accentuating the power of nonstate actors, and in particular multinational corporations, vis-à-vis the state. Does the advent of e-commerce represent a further challenge to the sovereignty of the state in the modern international system? If multinational corporations circumvent national regulations more easily through e-commerce, or if states engage in a “race to the bottom” in terms of lowering domestic regulations to try to promote the use of e-commerce, then a credible argument could be made that state sovereignty is eroding in the face of the Internet and e-commerce. On the other hand, if states succeed in maintaining or even enhancing their regulatory frameworks with regard to e-commerce, then no such additional challenge to state sovereignty would appear to exist.

State

The next level of analysis is the state, which allows researchers to probe more deeply into the country-specific conditions leading to the diffusion and effects of e-commerce. First, in terms of conditions driving e-commerce use, it is important to understand the role of government policy versus other, exogenous factors in facilitating the diffusion of e-commerce. Do the actions of governments make a difference in how individuals and firms use e-commerce? If so, which government policies seem to matter most? Is there a common set of government policies that is most conducive to the use of e-commerce, or is there substantial variation in successful e-commerce growth policies? On these questions, one must also consider whether certain governments seek to curtail or at least modify the growth of e-commerce in such a way as to strengthen the state vis-à-vis society. Which policies are those states enacting, and have these policies worked in terms of the patterns of e-commerce diffusion within those states’ borders?

Second, in terms of the country-specific effects of e-commerce, important economic, political, and social questions arise. The economic questions center on whether e-commerce has an independent impact on a country’s productivity and growth. Also, to what extent does e-commerce facilitate a country’s economic integration with the rest of the world? Does e-commerce make it easier for firms within one country to invest in and trade with other countries? The political questions evaluate how e-commerce alters the traditional functions of government, both in terms of the government’s procurement of goods and services, and in terms of the government’s provision of services to the population. Also important is whether e-commerce creates new winners and losers within society and therefore alters traditional domestic socioeconomic divides. Finally, in terms of the social effects, how has e-commerce changed the way society functions? Is the e-commerce marketplace only for a privileged few, or does it have a broader impact on society?

Individual Firm and Person

The individual level of analysis evaluates the impact of e-commerce on individual firms and persons and how they interact within the economy and society. How does e-commerce change the traditional boundaries and functions of the firm, such as sourcing, production, marketing, and sales? Are there e-commerce opportunities and efficiencies at each step of the process? Also important to consider is whether e-commerce may play a greater role in changing interactions in some sectors compared to others, with attendant differences in benefits. In terms of the effects on individual people, how does e-commerce alter how individuals make their purchasing and investment decisions?

Each of these three levels of analysis is examined more fully in the following literature review section. The literature review provides an overview of the evolution of e-commerce research up to early 2015. The focus is less on an in-depth review of the research content, and rather more on how the research picture is developing, with an eye toward both what is capturing researcher interest and lingering gaps in research topics.

A Comprehensive Review of the Literature

The research on e-commerce has evolved since its inception in the early 1990s. Today, the literature differs by discipline, with considerably more attention given to e-commerce by the legal, business, and technical communities than by the social science disciplines, economics and political science. Indeed, it is remarkable how many of the intellectual and social dimensions outlined above have yet to be fully addressed, and how little attention has been given to e-commerce by the top-ranked international relations journals and presses. The broader phenomenon of the Internet, of course, has attracted much more attention, but that literature is beyond present purposes.

Nonetheless, international institutions and other nongovernment organizations, including the World Bank, the World Economic Forum, the United Nations Conference on Trade and Development (UNCTAD), and the OECD, have spurred data collection and research. Substantive research on e-commerce issues ranging from institutional topics to economic development appear in annual publications such as Information Economy Report (UNCTAD), Information Technology Outlook (OECD), Global Information Technology Report (World Economic Forum), and at the World Bank’s InfoDev portal.

Our criteria for selecting books and articles for discussion here include (1) the most widely cited works, as measured by the Social Science Citation Index (via the Web of Science); (2) works published by top-ranked journals and academic and private presses; and (3) works that offer a fresh perspective.

Overview by Discipline

Important to any literature review is how the various social science disciplines have approached publication of e-commerce research: whether to consider e-commerce as merely another way of engaging buyers and sellers in the market, or whether e-commerce is seen as distinct enough to warrant its own publication space.

In economics, special issues of the Journal of Economic Perspectives and the Journal of Industrial Economics in 2001 focused on how e-commerce might change the relationship among firms, individuals, and the marketplace. Also in 2001, Strategic Management Review, Academy of Management Journal, Journal of Management, and Journal of International Business Studies included e-commerce articles in special issues on entrepreneurship, management organizational forms, management in the information age, and the conduct of global business. Other journals, such as Psychology and Marketing, devoted special issues to e-commerce, specifically on the topic of e-commerce pricing (2004). The major political science journals, in contrast, did not dedicate any special issues to e-commerce.

More recently, e-commerce research has tended to compete for inclusion in the extant set of journals. Specialized journals also have sprung up; lasting publications include International Journal of E-Business Research, International Journal of E-Commerce, Electronic Markets, and Electronic Commerce Research. With this beginning, the content and evolution of research will now be discussed according to the global systemic, state, and individual analytic framework.

Research on Global Systemic Questions

The research agenda focuses on several issues. First, a number of works examine the differential spread of e-commerce across countries. Second, since e-commerce transactions have had global potential from the very beginning, researchers look into the treatment of e-commerce issues in both extant and new international and transnational organizations, agreements, and negotiations. A third, relatively unexplored question is the extent to which e-commerce challenges state sovereignty.

The Global E-Commerce Divide

Does e-commerce exacerbate, attenuate, or simply mirror traditional disparities between states, such as between developed and developing countries? It is well understood that the Internet has spread more rapidly to developed than to developing countries, a phenomenon described in the literature as the “digital divide” (Hargittai, 1999; DiMaggio et al., 2001; Norris, 2001; Chinn & Fairlie, 2006; Crenshaw & Robison, 2006; Milner, 2006; Weber & Kaufman, 2011). This literature can also shed light on e-commerce diffusion trends, as individuals and firms must, of course, have access to a computer network before they can purchase and sell goods and services online. Within this literature, there is substantial debate as to whether the digital divide is primarily a reflection of income differentials between developed and developing countries (Hargittai, 1999; Martin & Robinson, 2004; Chinn & Fairlie, 2006), or whether political and social forces also influence the Internet’s diffusion across the globe. Milner (2006) and Crenshaw and Robison (2006), for example, argue that democratic states are more likely to experience rapid Internet growth. Also, Orviska and Hudson (2009) find that rule of law impacts the extent to which people have confidence in the security of the Internet.

Nonetheless, the growth of e-commerce does not perfectly correlate with the Internet’s diffusion. As a report from the OECD (2008) makes clear, there is substantial variation in e-commerce use even among the world’s most Internet-connected countries. Sorting out the similarities and differences in how individuals and firms use the Internet in different countries can help to direct attention toward the implications of e-commerce for the balance of power between states. Some country-specific work has been done on this topic, as has more analysis of the decision processes of firms, as discussed next.

International Organizations and E-Commerce

In 2003, Randi Bessette and Virginia Haufler puzzled, “Why is there no international information regime?” (see also Franda, 2001). While there is no single, overarching international organization responsible for managing the Internet and e-commerce, states have decided to use a mix of existing and new organizations and agreements to manage the inevitable cross-border regulatory issues that accompany e-commerce.

Given that many, if not most, international e-commerce transactions involve the physical cross-border delivery of goods purchased over the Internet, then the functional expertise of the World Trade Organization (WTO) in trade matters makes that organization the obvious choice for handling the trade aspects of e-commerce (Mann & Knight, 2000; Nielson & Morris, 2001; Wunsch-Vincent, 2005; Peng, 2014). The WTO also is well equipped to dismantle the barriers to trade for the infrastructural prerequisites of e-commerce, including telecommunications and computer-related services, under the General Agreement on Trade in Services (GATS), and cross-border trade in information technology products, under the Information Technology Agreement (Mann & Liu, 2009). The WTO decision-making framework, however, is slow and cumbersome relative to the rapid evolution of e-commerce (Braga, 2005; Mattoo & Wunsch-Vincent, 2004). WTO trade law also does not provide an adequate legal framework for the digital delivery of e-commerce purchases (Weber, 2010).

Certain regional organizations have also taken a lead on regulatory issues related to e-commerce, albeit to different ends. On the one hand, the OECD, much like the WTO, has emphasized the importance of deregulation for the expansion of the Internet, apart from the important area of consumer privacy. Unlike the WTO, though, the OECD is not a rule-making organization, and therefore its role has been chiefly to serve as a research unit and forum from which recommendations are disseminated to state members (Mann et al., 2000, pp.154–155). On the other hand, regional organizations such as the Asia-Pacific Economic Cooperation (APEC) have moved only tentatively toward the deregulation of telecommunications networks and other infrastructure prerequisites of e-commerce, which reflects the policy preferences of its members (Taylor, 1999; Mann & Rosen, 2001).

Other supranational bodies have, at times, actively promoted e-commerce as an important motivator for policy reform to aid economic development. For example, the 2000 G-8 Summit in Kyushu-Okinawa, Japan, established the Digital Opportunity Task Force to address measures designed in spirit to eliminate or at least decrease the global digital divide. Even as the global economy and membership of the G-8 have evolved, digital inclusion remains a topic for the communiqué (2008 communiqué, paragraph 18). Also, the United Nations Conference on Trade and Development (UNCTAD), the United Nations Development Program (UNDP), the International Telecommunications Union (ITU), and the United Nations Educational Scientific and Cultural Organization (UNESCO), along with many other groups, sponsored the World Summit on the Information Society in 2005 to discuss e-commerce, among other topics.

The Internet Corporation for Assigned Names and Numbers (ICANN), founded in 1998, is a private–public institution that interacts with other multilateral organizations such as the World Intellectual Property Organization (WIPO). ICANN’s responsibility for assigning unique Internet addresses and its management of the associated intellectual property issues impacts e-commerce in several ways. First, the Internet address is an important tool of business identity and thus is key to marketplace recognition and e-commerce transactions (e.g., business sales). But the Internet address also has intellectual property value. As e-commerce moves across borders, assurance that a corporation can maintain its business identity in multiple countries via its Internet address is a key aspect of competition in the marketplace. When is a competitor’s use of a business’s Internet identity a violation of intellectual property? ICANN’s dispute settlement procedures are designed to help adjudicate such issues (Mann, 2002).

The Safe Harbor Agreement evolved to address U.S.–European Union (EU) cross-country differences on the key regulatory issue of privacy. As Henry Farrell explains, the Safe Harbor Agreement attempts to blend the very different approaches of the United States and the EU to the issue of privacy and data regulation through state regulation and private enforcement of that regulation (Farrell, 2003; Knight, 2003).

What is not yet clear is why certain issues fall to extant organizations, while other issues appear to necessitate the creation of new, issue-specific organizations. Is the selection of certain forums over others simply due to the relative functional strengths and weaknesses of each organization? Are powerful states engaging in “forum shopping” by using whichever organization best serves their interests (on the latter, see Drezner, 2007) or by creating new ones as needed? This is an important, still unaddressed area of research.

E-Commerce and State Sovereignty

An ongoing debate in the literature is whether e-commerce presents additional challenges for the sovereignty of the state in the international system. Does e-commerce allow nonstate actors, particularly multinational corporations, to challenge the state’s traditional domains of authority?

Two areas where e-commerce appears to challenge the state’s authority are taxation and online gambling. First, with regard to taxation, as Mann et al. (2000) argue, e-commerce makes it more difficult for states to raise revenue through taxes on sales, particularly cross-border sales, from multinational corporations, and it might make sense for policymakers to reconceive a tax system that is more focused on labor income than on product sales. Another suggestion is for states to harmonize and coordinate their tax policies on cross-border e-commerce sales, so as to make taxation easier to administer (Paris, 2003). Such action, however, would severely limit a state’s ability to set taxes based purely on domestic considerations. Second, states have struggled to regulate online gambling, particularly when the Internet servers are housed offshore (Cooper, 2011).

Apart from the issues of taxation and gambling, states can be quite successful in using e-commerce to secure their interests. For example, Drezner (2004) argues that powerful states such as the United States, the EU, and Japan have seen their power accentuated vis-à-vis nonstate actors in many aspects of e-commerce regulation, such as content regulation, intellectual property rights, and privacy.

Research on State Questions

A first group of studies considered here focuses on the role of government in the growth and development of e-commerce. To a greater or lesser degree depending on the country, the state regulates both the hard (e.g., telecommunications networks) and soft (e.g., security) infrastructures that support e-commerce. A second group of studies considers the government as a purchaser and seller of e-commerce, as, for example, through government procurement contracts and the online provision of state services, such as automobile registrations. A third perspective looks at the impact of e-commerce on major macroeconomic indicators such as international trade, growth, inflation, and employment.

Government as E-Commerce Regulator/Facilitator

The infrastructure necessary for individuals, firms, and governments to use e-commerce includes, first, the hardware and software of computers, wireless media, and information technology products that connect to the Internet. In addition, e-commerce requires the network infrastructure of telecommunications for data and information exchange and delivery. Appropriate financial infrastructure is also important, since e-commerce involves monetary transactions. Finally, distribution infrastructure completes the infrastructure needed for the delivery of tangible products as the end product of a transaction.

Because e-commerce involves financial transactions, the development of financial markets is particularly important (Oxley & Yeung, 2001; Allen et al., 2002). Claessens et al. (2002), for example, focus on the importance of financial institutions for the development of e-commerce in developing countries. But it is important to note that e-commerce also affects the conduct, performance, and structure of financial institutions themselves (Clemons et al., 2002; Zhu et al., 2004). For this reason, finance is a particularly fruitful area of research for both state and individual levels of analysis.

Given the nature and the multitude of e-commerce transactions, several shortcomings are inevitable, such as breach of security and privacy, or abuse of personal information arising from lack of control over Internet users or from undefined legal jurisdictions, among other factors. From the early days of the Internet, researchers have investigated this issue (e.g., see Swire & Litan, 1998; Udo, 2001). More recent studies have investigated the different factors that influence the level of trust of Internet users (McKnight et al., 2002). On the one hand, user characteristics affect the perception of need for security infrastructure, as, for example, frequent users of e-commerce have a higher level of trust in the security of the Internet marketplace compared to less frequent users (Chen et al., 2008). On the other hand, trust indicators (such as security features, privacy statements, third-party security seals, and third-party privacy seals) do increase the consumer’s willingness to provide private information, although the effect of the trust indicators increases or decreases depending on the consumer’s perception of the website’s ease of use (Ha & Stoel, 2009; McCole et al., 2010). Finally, there is the role of the intermediaries, both those narrowly focused on trust (e.g., Verisign) and those packaged with other business activities (e.g., eBay). Determining how important these intermediaries are versus the site-specific features or societal-level environment will be an active area for future research.

In sum, the actual security infrastructure affects the social infrastructure, and business approaches and government regulation need to consider both actual security and social attitudes when building the social infrastructure of e-commerce. Overall, this research area is one of the most robust and active across the business, psychology, and policy communities, as is suggested by the summary article by Goldsmith and McGregor (2008).

E-Government and E-Governance

From early on in the evolution of the Internet and e-commerce, governments themselves looked to capture the efficiency and productivity gains touted by business. E-government research has focused on the activities internal to government functions (the back-office side of government) as well as the interactions between governments and consumers and businesses. Both research directions can also involve a political dimension, which in the literature is conceived of as “e-governance.”

Much research on e-government is at the state level of analysis. This research in principle offers opportunities for cross-country case comparison, but often the researchers’ questions and methods vary, so apples-to-apples comparisons are rare (an exception is Bertot et al., 2010). Examples include Panzardi et al. (2002) on Argentina; Smith (2009) on Chile; Lean et al. (2009) on Malaysia; and Hung et al. (2006) on Taiwan. See Basu (2004) for a general overview focused on developing countries and Strejcke and Theil (2003) for the European Union.

In some respects, the direction of e-government research is similar to that for business, with surveys and studies trying to determine barriers to adoption among customers. For example, establishing trust is just as important for government as it is for business (Warkentin et al., 2002; Avgerou et al., 2005). Studies of why individuals use e-government websites (such as for political issues, e-commerce, or information) can help to inform the government’s e-commerce strategy (Thomas & Streib, 2005; West, 2008).

What stands in the way of e-government is also an interesting arena for research (Eyob, 2004; Steyaert, 2004). Hurdles to implementation can include many of the same ones that affect private enterprise (infrastructure). But the multiple layers of governmental authorities (subfederal and federal) can also be important as different governmental units adopt e-commerce at different paces, with the potential for systems that are not compatible or seamless either in the back office or front office (Morris & Moon, 2005).

The interaction of e-commerce, the operations of government, and business and society can have an impact on governance—the relationship between government and the governed. Depending on the relationship between the state and society, it could be less or more difficult to develop consumer and business trust to use e-government than to use e-commerce in private transactions. The role for government as a partner in public–private initiatives is an area for fruitful research (Andersen et al., 2003). Consideration of private attitudes toward e-government websites has an interesting nexus in supranational e-commerce websites such as in the European Union and in cross-border applications (Farrell, 2003).

In sum, given the range of interaction between governments and e-commerce activities and actors, much fruitful research still awaits to be done.

The Macroeconomic Impact of E-Commerce

At the macroeconomic level, the research focus was initially was on the relationship between information and communications technologies (ICTs), worker productivity, and macroeconomic growth and development (Bassani et al., 2000; Stiroh, 2001; Draca et al., 2006; Heeks, 2010). For an assessment of this question, comparing developing and industrial economies, see, for example, the Information Economy Report 2007–2008, published by UNCTAD. More recent work uses firm-level data (so-called microdata) to examine the relationship more explicitly between e-commerce usage and a firm’s productivity (Bertschek et al., 2004; Mattuecci et al. 2005; Arvantis & Loukis, 2009) and to develop case studies of e-commerce usage and international trade (Moodley, 2003). Research is starting to connect the dots between institutional infrastructure performance and macroeconomic performance, particularly examining the relationship between e-commerce infrastructures and international trade (Wilson et al., 2005).

Research on the Individual and the Firm

Most research on e-commerce at the individual and firm level addresses traditional issues in industrial organization: the structure of the industry, pricing strategies of firms, and issues relating to market imperfections. Specific topics that have generated a substantial amount of research, in part because of the potential for linkages between policy and outcome, include the impact of e-commerce on small and medium-sized enterprises (SMEs), the role of auctions and shopping bots in pricing and marketing strategies, and problems that the Internet and e-commerce pose for intellectual property. Because the e-commerce environment is so rich in data, the issue of the privacy and security of information is also an area of research at the level of the firm.

E-Commerce and SMEs

Researchers have looked at the adoption and impact of e-commerce on small and medium-sized enterprises (SMEs). In principle the lower costs of the Internet should favor SME access and growth, especially given new cloud-based technologies. Much research focuses on whether that is true, and if not, why not (Feindt et al., 2002), and whether certain kinds of SMEs might be favored (manufacturing vs. service and hospitality; Santarelli & D’Altri, 2003). Many studies are country specific, in keeping with the discussion above on how the nature of the business, governmental, and social infrastructure affects firms, including, and maybe even particularly, SMEs. Examples include Stephen Drew’s study of the United Kingdom (2003), and Grandon and Pearson’s study of Chile (2003; see also Grandon et al., 2011), among many others. As cross-national data are now becoming available, analysis of which country characteristics help or hinder SMEs’ uptake of e-commerce is a fruitful direction for research.

Business Competitiveness and Efficiency

Research has increasingly delved into specific areas where e-commerce might particularly benefit business competitiveness and efficiency. For example, studies focus on the impact of e-commerce adoption on the functional operations of the firm, such as procurement and supply chain management, including inventory management, transportation, warehousing, and product scheduling (Lancioni et al., 2000; Dai & Kauffman, 2006; Baker et al., 2008; Smith & Offodile, 2008). Of course, one of the key attributes of the Internet is that it confers network externalities; research investigates the extent to which this affects the valuation of intangibles in e-commerce firms, which enhance competitiveness and profitability (Zhu & Kraemer, 2002; Rajgopal et al., 2003). Much of this research is quite applied, although a subset yields broader insights or comparative assessments across types of firms.

Surprisingly, little research has focused on one of the most basic questions: Does the investment cost of implementing e-commerce investments pay off? This is the question of costs and benefits, and involves measurement and evaluation concepts, including “satisfaction” (Gide & Wu, 2007; Standing & Lin, 2007). Zhu (2004) examines the impact on firms’ performance of metrics of information, transaction, customization, and supplier connectivity. Some research on this question has focused particularly on businesses in developing countries (Humphrey et al., 2003). From the research on business competitiveness and efficiency, it appears that technology-oriented companies are more likely to gain from e-commerce. Moreover, this research reveals that, in the developed and developing world alike, not all companies gain from investments in e-commerce. There is much room for research that considers whether it is the nature of the product, the customer, the production process, or the market that is most likely to yield net gains from e-commerce investments. Also, linking back to the SME research, one can consider whether the overall political and social dimension of the business environment of a country is the most important for e-commerce uptake.

Intellectual Property and E-Commerce

E-commerce can create intellectual property, but it also makes it easier to steal. As noted earlier, an e-commerce URL creates a brand identity for the firm that can be global. Yet the intellectual property regimes do not have global jurisdiction (Mann, 2001), and research on how differing approaches to intellectual property affects global e-commerce has much room to develop further.

Another offshoot of e-commerce is that it creates vast data on customer transactions. We have already addressed the potential privacy and security issues. But another question is whether these data are intellectual property, or whether the method and organization structures by which the data are organized represent intellectual property. The intersection of global economic forces and national legal regimes is an important area for ongoing research.

A second issue is that the e-commerce activity itself creates the potential for patenting. For example, the means by which customers buy online (Amazon’s one-click feature) or software that underpins the search process online (Google) can be patented, at least in the United States, under the so-called business method patent. Studying the characteristics and potential value of these business method patents is a fruitful area for economics and business research (Yen-Chun, 2005). The potential for questions regarding the applicability of cross-border law and forum shopping are important areas for law and political science.

E-commerce and the Individual

From the very beginning of e-commerce, the issue of the individual experience has been crucial. After all, there are more individual buyers than firms, so B2C commerce is, in some sense, a potentially larger research topic (Szymanski & Hise, 2000). Research on e-commerce and the individual includes, for example, work on sales and marketing, the online experience, and e-commerce and individual characteristics.

Research looks at the intersection of e-commerce, information, and branding through the new approach of allowing consumers to review products online (Amblee & Bui, 2008). Vast stores of click-stream information is spawning a new research industry—quantitative marketing to predict consumer purchases—and is also expanding the analysis of auctions (Becherer & Halstead, 2004; Sismeira & Bucklin, 2004; van den Poel & Buckinx, 2005). Given countries’ differing approaches to privacy and allowable data collection, the pace and scope of such quantitative marketing and auctions, with their implications for further e-commerce innovation, could differ substantially across countries.

Characteristics of the individual may influence their use of e-commerce, including how they customize their own buying experience. Tests suggest that avatars, or online “personalities,” customize the e-commerce experience according to age, gender, and purchasing history (McGoldrick et al., 2008). Reduced vision, hearing, mobility, and cognitive functions affect older users of e-commerce (Smith, 2008), which may lead to innovations to reach these buyers or may keep these buyers from the e-commerce marketplace. Initially, there was a “gender divide” created by the technology; now the research focus is relatively more on how the online experience is interpreted differently by gender (Kolsaker & Payne, 2002; Rodgers & Harris, 2003). Research on different attitudes by nationality is also a potentially interesting area for research (Sagi et al., 2004). Whether technological devices such as avatars can also make e-commerce culturally specific, such as with the use of idioms and visual cultural symbols, should be of interest to international relations scholars.

Directions for Further Research

Research on the cross-national and international dimensions of e-commerce has been offered here on three levels: global systemic, state, and individual customer and firm. Important themes in the global systemic perspective include the divide between developed and developing countries, international organizations and e-commerce, and e-commerce and state sovereignty. Important themes from the state-level perspective include the government’s role in the hard and soft infrastructures supporting e-commerce; e-government and e-governance; and how e-commerce can enhance the productivity, international trade, and economic growth of a country. Finally, at the level of e-commerce and the individual consumer and firm, research becomes much more diffuse. The organizing themes here are e-commerce and SMEs, business competitiveness and efficiency, intellectual property issues, and e-commerce and the individual.

This broad research agenda has been largely empirical, and scholars have fared much better in connecting the dots between their empirical findings and recommendations for policy than between empirics and theory. Perhaps this is the major reason that the top-ranked journals and presses in international relations have published so little on e-commerce. Another likely reason lies in the multiple data problems facing e-commerce researchers, namely, the absence of cross-sectional time series data that would facilitate the kind of empirical work of interest to major journals and presses.

Hopefully, researchers have been assisted in finding the intellectual heritage of their current research, and, by considering what has been done before, will not only obtain insights from their present work, but also gain some perspective based on the, albeit short, history of e-commerce. In addition, at this point in the development of the research agenda on e-commerce, metastudies of some of the key substantive areas would be highly valuable to the research community.

Links to Digital Materials

The following paragraphs describe and provide hyperlinks to major data sources on e-commerce. The availability of data for research purposes has improved greatly over the last several years, particularly as datasets are starting to use common definitions of e-commerce. Nonetheless, to facilitate cross-country longitudinal studies, more cross-sectional time series data are needed. Moreover, firm-level and survey data used in empirical research on e-commerce need to be made available to the public for use beyond the original study.

Country-Specific Data on E-Commerce. U.S. Census Bureau, E-Stats: Measuring the Electronic Economy. Most countries compile their own statistics on e-commerce, and while it can be time consuming to use these sources for a cross-country comparison study, these are often the most comprehensive and up-to-date statistics on e-commerce within a given country. For example, the U.S. Census Bureau’s website has statistics on e-commerce manufacturing shipments, sales for wholesale and retail trade, and revenues for service industries. Also, unlike many of the cross-country datasets, time series data are available from this site.

OECD Key Information Communication Technology (ICT) Indicators. These 15 datasets, updated annually, are published by the OECD’s Directorate for Science, Technology, and Industry. Most of the indicators measure access and use of the Internet. The most relevant indicator for measuring trends in e-commerce is Internet Selling and Purchasing by Industry. The data as presented on the OECD website are not in time series format.

World Bank Enterprise Survey. This portal and dataset offer comprehensive data at the level of the firm on use of the Internet and websites for business by sector and by country, along with a vast array of other data. The portal offers an easy access to aggregated data. The underlying full dataset allows researchers to get to the microdata at the firm level. There are no time series data, however.

Acknowledgments

The authors thank Nathan Eckman, Barbara Jiaggwe, and Chelsey Megli for their research assistance, as well as two anonymous reviewers for their extensive and detailed feedback.

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